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BBVA said it carried out the entire process for a €75m corporate loan — from negotiating terms to signing the loan — on a mutually distributed ledger that kept both the bank and borrower up to date on the loan’s progress.
The process cut the negotiation time for the loan from “days to hours” and BBVA hailed it as a “significant advance in the exploitation of [distributed ledger] technology” not just in banking but in the way private and public blockchains can interact.
“Blockchain can offer clear advantages for all sides in the corporate loan market in terms of efficiency, transparency, security,” said Carlos Torres Vila, BBVA chief executive.
Blockchain is regarded as one of the most promising fintech themes for banks and has a broad range of applications across payments, clearing and settlement, trade finance, identity and lending.
The main advantage of blockchain over existing processes is its ability to speed up and simplify complex transactions by making changes and updates immediately visible to all parties. A single blockchain-based system is also cheaper to maintain than the myriad of systems banks use for transactions now.
In the lending market, blockchain has more potential in corporate and syndicated loans than in consumer loans, because corporate and syndicated lending is more complex and records need to be accessed by a broader range of people than the single borrower typically involved in consumer loans.
BBVA is also working on blockchain initiatives for international payments, international trade and foreign exchange.
Full article on Financial Times (subscription required)